Unimech plans to use IPO proceeds to expand - 7091

by **Cals** Sat 13 Jul 2013, 11:34

Published: Saturday July 13, 2013 MYT 12:00:00 AM
Updated: Saturday July 13, 2013 MYT 7:17:14 AM
Unimech plans to use IPO proceeds to expand
[b style="margin: 0px; padding: 0px; border: none;"]BY DAVID TAN[/b]
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Ne twork: Unimech, with its headquarters in Prai, has 35 warehousecum- distribution offices in Kalimantan, Sumatera, Irian Jaya and Java.
GEORGE TOWN: Unimech Group Bhd’s subsidiary PT Arita Prima Indonesia, which is targeting a listing in Indonesia in early 2014, plans to use its initial public offering (IPO) proceeds of approximately RM20mil to expand its sales network in the country.
Group executive chairman Datuk Lim Cheah Chooi said in an interview that the funds generated would be used for setting up four more warehouse-cum-distribution centres in Kalimantan and Sulawesi in 2014.
“This year, we will open two more warehouse-cum-distribution centres before the end of 2013,” Lim added.
At present, Unimech has 35 warehouse-cum-distribution offices in Kalimantan, Sumatera, Irian Jaya and Java.
“Besides expanding the distribution network, we will also use the funds to expand the range of valves marketed under our own brand names, Arita and Unimech.
“We will expand the range to include petrochemical and oil and gas valves.
“The valves will be produced by Unimech’s manufacturing facilities in Tianjin, Hebei, and Huangshan in China, and in Penang,” he said.
Currently, PT Arita generates 35% of its revenue from the sales of its valves to the palm oil industry, and about 30% from sales to the marine segment, while the general industries contribute the remainder.
PT Arita is expected to generate about 30% to 35% of Unimech’s revenue in 2013, compared to 25% in 2012.
In 2012, PT Arita posted RM51mil in revenue.
“After the listing in Indonesia, we expect the contribution to reach 40%.
“Following the IPO, Unimech will hold a 64% stake in PT Arita, compared to 85% presently,” he said.
Lim added that the IPO proceeds would also be used to expand its distribution network in Indonesia for Riello burner products.
The group has just been appointed as Riello’s sole distributor in Indonesia.
According to Hong Leong Investment Bank’s latest report, Malaysia is unlikely to reclaim its position in the upstream plantation segment from Indonesia due to the shortage of arable land for oil palm plantations in Malaysia and labour scarcity.
As highlighted in the Economic Transformation Programme, Malaysia has only 1.3 million ha of arable land for oil palm plantation, of which 75% is located in Sarawak, according to the report.
“The limited scope for upstream expansion in Malaysia has resulted in Malaysian companies redirecting their efforts and resources towards regional expansion.
“As at end-2009, Malaysian companies already owned 25% of total oil palm plantations in Indonesia.
“We believe the ownership will continue to rise, given the arable land bank for upstream plantation as well as the availability of labour there,” he said.